Correlation Between ATT and Walmart

Can any of the company-specific risk be diversified away by investing in both ATT and Walmart at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ATT and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ATT Inc and Walmart, you can compare the effects of market volatilities on ATT and Walmart and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ATT with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Walmart.

Diversification Opportunities for ATT and Walmart

0.93

Correlation Coefficient

ATT  Walmart

Almost no diversification

The 3 months correlation between ATT and Walmart is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and ATT is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ATT Inc are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of ATT i.e., ATT and Walmart go up and down completely randomly.

Pair Corralation between ATT and Walmart

Given the investment horizon of 90 days ATT Inc is expected to under-perform the Walmart. In addition to that, ATT is 1.26 times more volatile than Walmart. It trades about -0.12 of its total potential returns per unit of risk. Walmart is currently generating about 0.09 per unit of volatility. If you would invest  180,602  in Walmart on September 24, 2024 and sell it today you would earn a total of  4,398  from holding Walmart or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

ATT Inc  vs.  Walmart

ATT Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and Walmart

The main advantage of trading using opposite ATT and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Walmart can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Walmart will offset losses from the drop in Walmart's long position.

The idea behind ATT Inc and Walmart pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.